Iran war exposes cost of Asia's fossil fuel reliance | Reuters

reuters.com ∙ 6 hours ago

Iran war exposes cost of Asia's fossil fuel reliance | Reuters

Top line

Pakistan's embrace of solar power bolsters its energy security and saves costs, while Bangladesh faces escalating financial burdens from its continued reliance on imported LNG amidst global energy shocks.

Summary

Amidst a second energy shock affecting global markets, Pakistan and Bangladesh present contrasting energy import strategies and outcomes. Pakistan has successfully reduced its reliance on imported fossil fuels to 25% through a significant adoption of solar power, anticipating minimal disruptions. In contrast, Bangladesh, after entering long-term LNG contracts, is now facing substantial financial strain from expensive spot market LNG purchases, exacerbated by geopolitical events like the Strait of Hormuz blockage. These purchases have cost Bangladesh nearly 15% of its average monthly imports, while its dependence on imported fuels for power generation has risen to 60% due to stagnant renewable capacity. The report highlights a global surge in renewables, which is decreasing reliance on fossil fuels, and underscores the economic vulnerability of import-dependent nations, calling for an accelerated global energy transition to mitigate future price volatility.

Highlights

Global markets are experiencing an energy shock, particularly affecting emerging market countries reliant on fuel imports.
Pakistan and Bangladesh demonstrate contrasting experiences with fuel imports and cleaner power sources in response to recent energy crises.
Following the 2022 energy shock from the Ukraine war, Pakistan adopted a consumer-led solar revolution, while Bangladesh secured long-term Liquefied Natural Gas (LNG) deals.
Recent geopolitical events, including the Iran-Israel conflict and Iran blocking the Strait of Hormuz, have disrupted contracted LNG supplies.
Bangladesh was compelled to purchase 11 LNG cargoes from the spot market between March and May at an average price of $21.35 per million British thermal units (mmBtu), double pre-war rates.
These spot LNG purchases cost Bangladesh approximately $880 million, equivalent to nearly 15% of its average total monthly imports for the fiscal year ending in June.
Pakistan has not made any spot LNG purchases, having reduced its dependence on imported fossil fuels to 25% from 32% before the Ukraine war.
Pakistan anticipates minimal power outages, even during non-daylight hours when solar power is unavailable, due to its reduced reliance on imported fuels.
An analyst suggests Bangladesh can learn from Pakistan's success in insulating itself from fuel price volatility.
Bangladesh plans to buy three more LNG cargoes for May delivery and has sought $2 billion in external financing for fuel imports, while trimming public spending.
Bangladesh's renewable capacity has remained stagnant, leading to a rise in its annual power generation from imported sources (gas, coal, and power from India) to 60%, up from 42% in 2021.
Globally, renewable additions are surging due to plunging costs, causing a decrease in fossil-fuel-fired power output despite supply disruptions.
Pakistan's solar boom is projected to cut $12 billion in oil and gas imports by February 2026 and is facilitating a shift towards electric motorbikes.
Analysts from Ember suggest that replacing planned gas capacity with solar in Southeast Asia could reduce generation costs by 60%.
The article advocates for accelerating the global energy transition to prevent recurring energy emergencies and price shocks, especially for fossil-fuel-importing nations.

Iran war exposes cost of Asia's fossil fuel reliance | Reuters

reuters.com ∙ 6 hours ago

Top line

Summary

Highlights

Global markets are experiencing an energy shock, particularly affecting emerging market countries reliant on fuel imports.
Pakistan and Bangladesh demonstrate contrasting experiences with fuel imports and cleaner power sources in response to recent energy crises.
Following the 2022 energy shock from the Ukraine war, Pakistan adopted a consumer-led solar revolution, while Bangladesh secured long-term Liquefied Natural Gas (LNG) deals.
Recent geopolitical events, including the Iran-Israel conflict and Iran blocking the Strait of Hormuz, have disrupted contracted LNG supplies.
Bangladesh was compelled to purchase 11 LNG cargoes from the spot market between March and May at an average price of $21.35 per million British thermal units (mmBtu), double pre-war rates.
These spot LNG purchases cost Bangladesh approximately $880 million, equivalent to nearly 15% of its average total monthly imports for the fiscal year ending in June.
Pakistan has not made any spot LNG purchases, having reduced its dependence on imported fossil fuels to 25% from 32% before the Ukraine war.
Pakistan anticipates minimal power outages, even during non-daylight hours when solar power is unavailable, due to its reduced reliance on imported fuels.
An analyst suggests Bangladesh can learn from Pakistan's success in insulating itself from fuel price volatility.
Bangladesh plans to buy three more LNG cargoes for May delivery and has sought $2 billion in external financing for fuel imports, while trimming public spending.
Bangladesh's renewable capacity has remained stagnant, leading to a rise in its annual power generation from imported sources (gas, coal, and power from India) to 60%, up from 42% in 2021.
Globally, renewable additions are surging due to plunging costs, causing a decrease in fossil-fuel-fired power output despite supply disruptions.
Pakistan's solar boom is projected to cut $12 billion in oil and gas imports by February 2026 and is facilitating a shift towards electric motorbikes.
Analysts from Ember suggest that replacing planned gas capacity with solar in Southeast Asia could reduce generation costs by 60%.
The article advocates for accelerating the global energy transition to prevent recurring energy emergencies and price shocks, especially for fossil-fuel-importing nations.